Suppose the Federal Reserve Has Set a Target for the Federal

question 36

Multiple Choice

Suppose the Federal Reserve has set a target for the federal funds rate. If initially the equilibrium interest rate happens to be higher than the target interest rate, then the Federal Reserve should _____ Treasury bills in the open market, _____ the money supply, shift the supply of money curve to the _____, and _____ the interest rate to the target rate.

• A)sell; decrease; left; raise
• B)purchase; decrease; left; lower
• C)purchase; increase; right; lower
• D)sell; increase; left; raise

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